Barlow’s Research Roundup: Loonie is world’s most shorted major currency

Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow

Betting against CAD

Scotiabank currency analyst Shaun Osborne highlights the loonie as the world’s most shorted major currency according to the Commodities futures Trading Commission report on futures positioning,

“The aggregate USD long climbed a marginal $0.7-billion week-over-week to $40.4-billion in the week ended July 7, reflecting sentiment in the period following the US and Canadian holidays that included the early resurgence in geopolitical tensions and renewed hostilities between the U.S. and Iran. The week-over-week changes included a meaningful narrowing in the sizeable JPY short, a notable increase in the CAD short, a clear push into bearish EUR positioning, and a narrowing in the GBP short. The remaining reporting currencies’ positions were largely unchanged week-over-week. The CAD is now the largest held net short, followed by the JPY, with the GBP and CHF in third and fourth, respectively. The NZD short reached a fresh record just ahead of the RBNZ hike, leaving bears vulnerable to the subsequent squeeze. The EUR short is relatively modest, as is the AUD’s. The MXN is the only net long among the reporting currencies, and is showing signs of a tentative recovery from early June”

This data takes a while to collect - the most recent report is positioning as of July 7.

Fund managers bullish

BofA Securities investment strategist Michael Hartnett summarized the results of their monthly global fund manager survey (FMS),

“Investor sentiment more bullish driven by optimism on macro ‘boom’, AI capex, dovish Fed; FMS cash levels fall from 4.1 per cent to uber-low 3.6 per cent, US equity OW biggest since Dec’24, as forecasts for ‘boom’ highest since Feb’22; BofA Bull & Bear Indicator @ extreme bull reading of 9.4 … Says reduce equity & high-beta exposure, summer upside for risk assets to remain stymied by bull positioning.

“FMS on Macro: record 54 per cent predict no landing for economy (39 per cent soft & 2 per cent hard), CPI expectations lowest since Jan’25 as FMS oil price forecast slumps from $86/bbl to $71/bbl; asked will Fed hike before midterms 83 per cent say no, i.e. Fed stays dovish; outcome of US midterms… 44 per cent say DEM House/GOP Senate, followed by DEM sweep (27 per cent). FMS on AI: investors say long global semis most crowded trade (huge 82 per cent) & AI hyperscaler capex most likely source of credit event (48 per cent), trimmed July tech longs to hedge AI risks; but no one short … Asked if AI stocks in bubble 48 per cent said no”

‘Dark-crossing’ oil tankers

Goldman Sachs oil analyst Yulia Zhestkova Grigsby outlines the supply/demand situation and describes “dark-crossing tankers”,

“The recent Middle East escalation pushed Brent prices back into the mid-80s and reversed an initially sharp recovery in Persian Gulf flows. Meanwhile, price-sensitive Chinese crude imports – whose decline has cushioned the Hormuz disruption – may have bottomed after Middle Eastern producers cut official selling prices for July-August … We estimate that Gulf exports recovered to more than 80 per cent of pre-war levels in the first two weeks after the MoU, but fell back to below 50 per cent (11mb/d) after renewed attacks on tankers in the Strait. This setback leaves the oil market short 13.4mb/d of Persian Gulf flows and, absent near-term de-escalation, would likely require greater demand destruction and renewed inventory draws. That said, the latest estimates of observable Gulf flows may understate actual total Gulf flows as some tankers reportedly cross the Strait with transponders turned off. Most “dark-crossing” tankers eventually switch their signals back on outside the Strait, leading to meaningful upside revisions to flows”.

Bluesky post of the day

Diversion

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